Happy Thanksgiving Day to the readership in the States and anyone that celebrates this holiday. It is a great day, unless, of course, if you are a turkey. The markets certainly have a lot of six-foot tall turkey's walking around each day. U.S. markets are closed today and the stock market will close early tomorrow at 1 PM EST. A strong analogy exists when comparing Thanksgiving Day to the global economy and markets. For those of you unfamiliar with the Thanksgiving Day holiday, back in the early days of the U.S., nearly 300 years ago, the Pilgrims, settlers arriving from Europe, were struggling. Food was scarce and the dream of a better life in the new America was turning into a nightmare. The native Indians, the American Indian, stepped in to help the settlers, not to provide them a fish dinner, but rather to teach them how to catch fish, and provide for themselves. Growing corn was key and soon the settlers were well versed with farming and hunting as well. The settlements thrived due to the help from the Indians. The settlers gave thanks to the Indians and everyone joined in a harvest celebration which takes on the custom of Thanksgiving Day each November.
What does this have to do with the global economy? Note that the Indians provided knowledge and guidance to help the settlers learn how to grow food, not simply providing them food to eat each day. The can-do American spirit was born with this attitude of jumping in and making any situation better through hard work and determination rather than sitting back and wating for the next meal. The world has changed. Perhaps the main reason the markets got it wrong with the presidential election (the markets were trading higher into the election on an anticipated Romney-Ryan victory), was that the majority of traders simply figured the American spirit would take hold and people would vote for a pro-job and pro-business ticket so the economy, and people's lives, could recover. It did not happen. Instead, folks came out in droves, voting for more government programs, more benefits, more food stamps, free contraception, the promise of lower-cost healthcare and even students were promised better loan provisions. A chicken in every pot. There is no blame to place on anyone. People are simply voting for the path to best survive on moving forward and are now trained that the government needs to play a bigger and bigger role in their lives. The markets were likely shocked that America has now forever changed moving forward, transitioning from a hard-working can-do attitude to a laissez-faire muddle-along things-are-good-enough attitude.
On a global scale the unrest across Europe provides insight into the future for the U.S. The obscene debt that governments all around the world has taken on is un-Holy. The Greatest Generation, a phrase coined by Tom Brokaw to describe the 60 to 90 year olds, may be described in future years as the Greediest Generation. Their contribution to saving the Free World during the big Wars is so great that these folks could never be paid back properly, however, the damage they performed with profligate spending and debt cannot be forgiven. In essence, they have forced a harder life on their grand children who are now stuck with paying the check for the lavish dinner feast over the last couple decades. The taking on of debt enabled all the lavish living thru the 1980's, 1900's, 2000's into the Housing Bubble when everyone had a brand new house and two brand new vehicles; the wine was flowing like water. The standard of living in the U.S. peaked early this century. Your children will not have a better life than you did. The debt has to be repaid at the same time the demographics of the population are aging placing an increasing burden on entitlement programs.
The protests in Greece, Spain and all over Europe are a result of the need for austerity to handle the massive debt burden. The memories of easy-living over the last couple decades is long forgotten. The unemployment is very high in these nations, although the numbers are somewhat misleading. The unemployment rate is likely one-half of the large numbers listed (unlike the U.S. where the unemployment rate reported is lower than the true rate of unemployment). The reason is that Greece, for example, is an underground economy, a cash society. Many young people are working but they simply work for cash and are not counted by government statistics. Un-Godly government spending and liberal entitlement programs create the need to raise taxes to cover the ever-increasing debt burden. But a funny thing happens when you raise taxes, and the leaders in the U.S. do not understand this either, is that raising taxes will result in less money coming into the government not more.
Higher taxes encourages the move to untraceable cash transactions. Folks begin to pay the house painter, car mechanic and cleaning lady in cash instead of dealing with nasty receipts. Once the general population feels they are being excessively gouged, they fight back by cutting the government out of the pie all together. This has already happened in Greece and will occur in the U.S. as the months tick by if taxes are raised. About 30% of the transactions in Greece are cash. In the States currently, about 5 to 8% are cash. If taxes are raised, more and more folks will start conducting business in cash to avoid Uncle Sam. Less State sales and local tax will further cripple the States and local municipalities. To verify this concept, look no further than Spain last week enacting regulations to prevent cash transactions from occurring. As Keystone's friends in Brooklyn say, "Good luck wit dat." Spain fully understands that an underground economy and cash society, forced on to the people thru higher taxes, is fully in place and crippling any hope of a recovery for their troubled nation.
To bring it full circle, the government largess and expanding entitlement programs trains all citizens to expect more subsidies and aid as time moves along; the opposite of what the American Indians taught the Pilgrims. The Indians did not hand them a fish dinner, they taught them how to fish. Greece displays the ugly outcome of what happens when all the government promises can no longer be fulfilled. The result is rioting, civil unrest, violence and perhaps worse. The correct path is self-motivation and self-reliance, the can-do American attitude. There is still time to right the ship, but it is taking on water profusely. If taxes go up, ask yourself, do you think you will start paying for services in cash (in concert with sympathetic business owners), to avoid Uncle Sam in the future?
For the house painting example, say it costs $1500, the legit, legal way, to perform the painting and sales and other taxes are charged in addition to the $1500. The government is happy with the $100, $200 or perhaps $300 or more cut they receive. However, in the future cash society, the home owner pays the painter, say, 1K in cash. Everybody's happy, the owner receives his new paint job for a discounted $1000 while the painter is happy since he does not have to pay sales or other taxes to the government and could simply slip the dough into his pocket and not record it in the books at all. The government receives zilch, their greed has cut them out of the equation. The law makers need to understand that people do not mind paying taxes, everyone understands that taxes provide vital needs such as roads, bridges, infrastructure, helping the needy and disabled, and many other noble causes, but people do not want to be gouged and taken advantage of, especially with political leaders spending money like drunken sailors, without accountability. Apologies to any drunken sailors, no one wants to place these noble naval men in the same category as politicians. 30% of something is something, 50% of nothing is zero. There in lies the problem for Greece and Spain. Good luck reversing the underground cash society mentality once it takes hold. Spain and Greece understand and are living this nightmare.
Now it is time to put the turkey feed bag on today while loosening the belt several notches. Of course pumpkin pie will be enjoyed as well. Keystone is thankful to all the loyal readers from around the world including our neighbors, Canada and Mexico, as well as the traders in the U.K., Australia, Singapore, Russia, Malaysia, Switzerland, Romania and many more. Continued success to all.
Keystone you are funny, entertaining and misguided of course. It is truly funny how you can twist history to see that the helpful Indians taught the needy welfare recipient pilgrims at the time to "Catch fish" not "take a fish" when we don't know for one second that they the pilgrims didn't actually steal the fish in reality. And if history proves an answer, as an index pointing towards the correct result of of history we can look at the GOI index. That's the Genocide of the indians index which has been very high since those nice independent young american's, pilgrims, came and asked the helpful indians to learn to fish (LOL). The White man and European has been in other words has been the welfare recipient of many cultures including the native americans, jews, african american, and now Mexican. IF it wasn't for the great hand outs in slave like labors for many century's, who would polish the bathroom floors, and do the crap jobs, all while working to the bone just so tehy can ask for more food stamps and condoms. After all government hand outs to the big government welfare babies has to stop and that's why we should not give our taxes to the military and their huge hand out for wars not started by many poor people. Or how about the big corporations who take money from bailouts and don't call that "welfare" they call that "a fish" to help explore America's future independence on foreign oil. Let's face it, this culture this country is run by welfare babies, both democrat or republican. They are the government run by the decedents of pilgrims. The poor poor hard working white middle class hero who has endorsed wars that cost way more than any contraceptive plan, or food stamp. They do what they have been doing since the days of the Indians and pilgrims, twist history so the opressor can feel oppressed. The rich and powerful have turned the middle class against the poor. The perfect plot to keep their power. And you keystone are lost in the stuffing that bloats the waistline, lost in a society that fools many with notions of who should get what and who should take what and have what. And the beat goes on, we are all turkeys waiting for the slaughter. Happy "learning how to fish" day, happy thanksgiving for the welfare we white Europeans demanded, most probably through violence, manipulation of the market, at the time, terror, lies, cheating, stealing, etc. and if you check the GOI index, you will see that it has crossed the resistance a way long time ago and now maybe we all are getting what we deserve for the holiday.
ReplyDeleteWell said, Anon, it appears there is more agreement there than disagreement. The Pilgrim's were 300 years ago when the Indians and white man got along, then, once the white man purchased Manhattan for beads, and the early wars, it was all down hill for the Indians after that, especially as the Wild West played out, sans a Custer's Last Stand victory. There is lots of gray area for both sides to ponder, the simple idea, however, ignoring who is at fault and how the global economy got to where it is at, is that the troubled nations move to become underground cash societies after high taxes are imposed, which thereby destroys the nation. All sides must give not just a little, but rather a lot, and learn that they cannot live the life their parents did, it will be a lower standard of living all around. That is not to say it would be an unhappy life, it can be actually more happy. Perhaps music, conversation, and other past times from yesteryear will return and people will find a more simple stress-free life makes them happy rather than a materialistic life. However, none of this changes the fact that countries have already turned into underground economies and have lost control (Greece and Spain) while others are on the way (U.S.). The solution is lots of pain for everyone. If the can is kicked further, then the pain will simply be even worse and for more people. Hopefully, it all works out for everyone.
ReplyDeleteI remember enjoying this post during last year's holiday, so I will link it here. A different perspective from what Keystone has posted, but I think it more agrees than disagrees:
ReplyDeletehttp://dailycapitalist.com/2011/11/24/the-real-first-thanksgiving/
Final paragraph conclusion:
"Thus the real reason for Thanksgiving, deleted from the official story, is: Socialism does not work; the one and only source of abundance is free markets, and we thank God we live in a country where we can have them."
Money will be taxed as withdrawn.
ReplyDeleteover the last 2-3 years , the big problem seems to be debt and the ability , or lack thereof , to repay it .
ReplyDeleteI have constantly wondered who/what are the lenders and what is their ability to absorb any non-repayment that may occur and what are the REAL consequences of non-repayment for the economies and the markets.
Many thanks to Keystone for all that he does here. It's been a genuine help to me.
ReplyDeletejxxd
Politics? Really? Well, it's your blog. And everyone useless and sucking of teet, yada, yada, yada. No one could possibly want anything better for themselves.
ReplyDeleteGreat comments all. Keystone's occasional articles, satire, and other occasional writings are meant to be thought-provoking, just like art is viewed differently by different folks, so is politics and economics.
ReplyDeleteKeystone is definitely not a political animal, as mentioned many times there is no difference between the two parties that is why is it pointless to spend energy there, both sides are Keynesians that love war. Both dem and repub will constantly overspend with money they do not have, constantly debase the dollar, and constantly search out new wars.
The dollar actually strengthened in value up until the Federal Reserve was formed in 1913. Despite the name "Federal" it is not a federal institution, it was named this to trick the public which it has successfully done for 100 years. The dollar has lost 97% or its value since the Fed was formed by the big wigs at Jeckyll Island.
For the last 20 years, Keystone and others have pleaded for adult supervision in the govenment to stop the spending and amassing of debt. Up until a couple years ago there was hope, but no longer. When Ron Paul was asked the other day what he thought about the fiscal cliff drama, he chuckled and said we are already off the cliff. He is correct. We are. It is humourous to see all the hand wringing and worry these days. The time to handle these problems have passed. Do not count on the current leaders, both sides are useless and will only do the bare minimum tthat kicks the can down the road, and the trouble in Europe and in the States will continue, until it doesn't, and the ending will not be pretty.
The above missive simply describes the progressive path on how nations are destroyed over profligate spending and promises that they cannot keep. Politicians do this dmaage since they live a privileged life while handing out money, looking like big shots and hero's, and they are gone years later, not around when the sh*t hits the fan, like now. It is truly sickening, and dems and repubs should be ashamed of themselves.
The fact remains that the debt is out of control and at the point of no return, like Greece and Spain, any cut in social benefits will result in rioting, higher taxes will result in a cash society as described above, it is over. Keystone is an optimistic fellow, but the outcome is already cast in stone. One potential outcome is WW III as dire as that is, since all the global economic debt woes will take a back seat and become less applicable if a global war conflict begins in earnest.
Sorry the news could not be better, but that is the way it is. Everyone lived high on the hog thru the 90's and early 2000's, so there is still massive deleveraging required that everyone does not want to face. That is why the Fed prints, to buy time and hope it works out. Their actions are losing impact which will signal the end is near. But, lots of dough can be made in the markets before then. Make preparations including keeping a lot of cash on hand for potential future bank runs and other upheaval, in the mean time, simply enjoy the ride each day.
All the names of the politicians, on both sides, from the last few decades especially, as well as all folks involved with the Fed since 1913, should be listed on a plaque to clearly identify them as the individuals that destroyed the nation. Good luck to all and keep on truckin', hope for the best, prepare for the worst.